History of the banks (ancient banks)

When the Roman Empire (ancient greece) disintegrated at the end of III century, banking continued to develop in the eastern part of the former empire. After the fall of its western part in the early Middle Ages, banking in Europe has not died completely. However, only in the XI-XIV centuries, when Western Europe witnessed a remarkable increase in population, production and trade, banking revived and began to play an important role in society. The earliest evidence of the medieval bankers’ existence has been found in the written sources originated from the Italian cities dating back to the XII century. Typically, a banker, doing business, was sitting on the bench that looked like a table, called bancum, so that the word “banker” comes from bancherius. Although the main function of the bankers in those days was the exchange of money, by 1200 they have already been taking deposits and paying interest on it. In addition, medieval bankers eased the conduct of commercial cases, made loans, opened credits to customers.

By XIV century moneychangers-bankers of this kind could be easily found in any European shopping center. Written orders, which were similar to modern checks, were used for the transfer of funds. Activity of most medieval bankers did not spread beyond a limited geographical region. Only very few of them supported the relationship with bankers in other countries and agreed to transfer the money over long distances. These functions could better describe the large retailers (merchants, bankers, or merchant bankers) who, due to the nature of their activities were more able to transfer money over long distances and to make loans to customers from quite distant places. In the XIV-XV merchants and bankers have greatly expanded network of agents in Europe to be able to maintain financial and business affairs on a large area.

The history of the commercial banks in the U.S. can be divided into separate periods: the colonial period, when financial institutions and markets were not numerous and performed basic functions; banking until 1863, early period of national development from American Revolution to the Civil War, when many current financial institutions were created and financial markets began to develop; banking from 1863 to 1913, when there was a sharp increase in the assets and operations of the American financial institutions and markets; banking from 1935 to 1945, when the state regulation of the banking increased; banking since 1945, when the state regulation and deregulation developed at full measure, internationalization emerged, the number of financial products multiplied, scandalous stories appeared and banking has become more complex and competitive. In 1661 the colonial legislature of Massachusetts passed the Law on usury. From this day begins the history of U.S. banks.

Forex history

The development of the Forex currency market is a long history, initiated by U.S. President Richard Nixon. It was his decision made on August 15, 1971 to suspend convertibility of dollars into gold, which led to the destruction of the regulation system of exchange rates of that time. Famous Bretton Woods system has exhausted itself, and it was replaced by a Jamaican currency system, born March 16, 1973. As a result, the U.S. has promoted a liberal monetary policy, regarding the price of gold in different currencies. However, American politicians could not save things that were already beginning to collapse. Exchange rates were constantly fluctuating under the Jamaican system. Current state required significant changes that occurred in 1975. At that time the first summit of the Group of Eight happened under the leadership of French President Valéry Giscard d’Estaing and Chancellor Helmut Schmidt in Rambouillet, which was attended by representatives from the following countries: France, United States, Germany, Italy, Japan, and United Kingdom. January 8, 1976 is the day of foundation of the Forex international currency market, which was formed after a meeting of ministers in Kingston. The newly formed Forex currency market has already changed the completely destroyed system and outlined the exchange rates.

Money is anything that is commonly accepted by a group of people for the exchange of goods, services, or resources. Every country has its own system of coins and paper money.

Bartering and Commodity Money

In the beginning, people bartered. Barter is the exchange of a good or service for another good or service, a bag of rice for a bag of beans. However, what if you couldn’t agree what something was worth in exchange or you didn’t want what the other person had. To solve that problem humans developed what is called commodity money.

A commodity is a basic item used by almost everyone. In the past, salt, tea, tobacco, cattle and seeds were commodities and therefore were once used as money. However, using commodities as money had other problems. Carrying bags of salt and other commodities was hard, and commodities were difficult to store or were perishable.

Coins and Paper Money

Metals objects were introduced as money around 5000 B.C. By 700 BC, the Lydians became the first in the Western world to make coins. Countries were soon minting their own series of coins with specific values. Metal was used because it was readily available, easy to work with and could be recycled. Since coins were given a certain value, it became easier to compare the cost of items people wanted.

Some of the earliest known paper money dates back to China, where the issue of paper money became common from about AD 960 onwards.

Representative Money

With the introduction of paper currency and non-precious coinage, commodity money evolved into representative money. This meant that what money itself was made of no longer had to be very valuable.

Representative money was backed by a government or bank’s promise to exchange it for a certain amount of silver or gold. For example, the old British Pound bill or Pound Sterling was once guaranteed to be redeemable for a pound of sterling silver.

For most of the nineteenth and twentieth centuries, the majority of currencies were based on representative money through the use of the gold standard.

Fiat Money

Representative money has now been replaced by fiat money. Fiat is the Latin word for “let it be done”. Money is now given value by a government fiat or decree, in other words enforceable legal tender laws were made. By law the refusal of “legal tender” money in favor of some other form of payment is illegal.

$$$

The origin of the “$” money sign is not certain. Many historians trace the $ money sign to either the Mexican or Spanish “P’s” for pesos, or piastres, or pieces of eight. The study of old manuscripts shows that the “S,” gradually came to be written over the “P,” looking very much like the “$” mark.

U.S. Money Trivia

On March 10, 1862 the first United States paper money was issued. The denominations were $5, $10, and $20. They became legal tender by Act of March 17, 1862. The inclusion of “In God We Trust” on all currency was required by law in 1955. The national motto first appeared on paper money in 1957 on $1 Silver Certificates, and on all Federal Reserve Notes beginning with Series 1963.

Electronic Banking

ERMA began as a project for the Bank of America in an effort to computerize the banking industry. MICR (magnetic ink character recognition) was part of ERMA. MICR allowed computers to read special numbers at the bottom of checks that allowed computerized tracking and accounting of check transactions.

Сredit is a method of selling goods or services without the buyer having cash in hand. A credit card is only an automatic way of offering credit to a consumer. Today, every credit card carries an identifying number that speeds shopping transactions. Imagine what a credit purchase would be like without it, the sales person would have to record your identity, billing address, and terms of repayment.

According to Encyclopedia Britannica, “the use of credit cards originated in the United States during the 1920s, when individual firms, such as oil companies and hotel chains, began issuing them to customers.” However, references to credit cards have been made as far back as 1890 in Europe. Early credit cards involved sales directly between the merchant offering the credit and credit card, and that merchant’s customer. Around 1938, companies started to accept each other’s cards. Today, credit cards allow you to make purchases with countless third parties.

The Shape of Credit Cards

Credit cards were not always been made of plastic. There have been credit tokens made from metal coins, metal plates, and celluloid, metal, fiber, paper, and now mostly plastic cards.

First Bank Credit Card

The inventor of the first bank issued credit card was John Biggins of the Flatbush National Bank of Brooklyn in New York. In 1946, Biggins invented the “Charge-It” program between bank customers and local merchants. Merchants could deposit sales slips into the bank and the bank billed the customer who used the card.

Diners Club Credit Card

In 1950, the Diners Club issued their credit card in the United States. The Diners Club credit card was invented by Diners’ Club founder Frank McNamara and it was intended to pay restaurant bills. A customer could eat without cash at any restaurant that would accept Diners’ Club credit cards. Diners’ Club would pay the restaurant and the credit card holder would repay Diners’ Club. The Diners Club card was at first technically a charge card rather than a credit card since the customer had to repay the entire amount when billed by Diners Club.

American Express issued their first credit card in 1958. Bank of America issued the BankAmericard (now Visa) bank credit card later in 1958.

The Popularity of Credit Cards

Credit cards were first promoted to traveling salesmen (more common in that era) for use on the road. By the early 1960s, more companies offered credit cards, advertising them as a time-saving device rather than a form of credit. American Express and MasterCard became huge successes overnight.

By the mid-’70s, the U.S. Congress begin regulating the credit card industry by banning such practices as the mass mailing of active credit cards to those who had not requested them. However, not all regulations have been as consumer friendly. In 1996, the U.S. Supreme Court in Smiley vs. Citibank lifted restrictions on the amount of late penalty fees a credit card company could charge. Deregulation has also allowed very high interest rates to be charged.

Eurozone: Juncker is not worried about the current euro exchange rate. On Friday Jean-Claude Juncker, the head of the Eurogroup and Luxembourg Prime Minister, said that although the increase of the single European currency to 14-month high is able to slow economic recovery in the countries of Eurozone, but this fact should not be to worry about too much. ”If the euro continues to move in the same direction as during the past weeks, there is a risk that it may slow economic recovery in Europe”, - said Juncker. It is worth emphasizing that since March this year, the euro rose to U.S. dollar by 18%.

USA: the weakening dollar is not too important - Grispen. Today the former head of the U.S. Federal Reserve System Alan Grispen said that he is not too concerned about the weakening U.S. dollar issue. “I am not very concerned about recent decline of the dollar”, - he underlined. Grispen underlined the danger of the increased public debt – it is, in his words, “the most disturbing aspect of the economic situation in the United States. We should remind that 2009 fiscal year ended with a U.S. deficit in the amount of 1.4 trillion dollars, which was the highest since 1945.

USA: Geithner noted that the country development will be slow. According to U.S. Treasury Secretary Timothy Geithner, the growth in the United States will be slower than it has been previously expected. Yesterday he remarked that inflation is not a dominant risk to the economy and the economy can help from the developing companies. Minister of Finance underlined that smaller companies need more capital, they remain uncertain about the consumer demand.

USA: small business is still under threat – according to Goldman. According to Goldman Sachs experts, small businesses in the United States are in a difficult situation and they are seriously threatened by bankruptcy. ”So, first, economic recovery in the V-shape is even less likely to happen than it can be assumed with the help of many standard economic indicators. Second, if the small businesses continue to show weakness, then the stock market, which by definition large businesses are dominating in, will continue to grow faster than the economy”, - explains Goldman Sachs experts.

According to the record of Federal Reserve System meeting from September 23 published last evening, the situation on the housing market is restoring with “rather moderate pace”. The FRS members agreed that the cost of the weak enough economic growth may be “relatively high”. In addition, some committee members voted for the program expanding of assets purchase secured by mortgage, one - for its reduction.

Japan: consumption in the country remains low. This morning the representatives of the Bank of Japan stated that the level of consumption in the country remains low, although the rate of inflation reduction is stabilizing. However, the perspectives for economic development still remain uncertain. The Bank underlined that lowering of prices can exceed expectations and optimism in the business sphere is increasing. In addition the Bank representatives shared that the export and production numbers are increasing and funding system is improving. In general, the economy of the Land of Rising Sun has accelerating development.